Introduction to Taxation
27.10.2018
What is tax?
Tax Code of the Republic of Kazakhstan;
Types of taxes;
PIT;
VAT;
CIT;
Other taxes;
Contents
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1. What is tax?
Tax is a compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods,
services, and transactions for public purposes.
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2. Tax Code of the Republic of Kazakhstan
• The main legal act establishing and
regulating taxation in Kazakhstan is the Code
“On Taxes and Other Obligatory Payments to the Budget” (the “Tax Code”).
• On 25 December 2017 the President of the Republic of Kazakhstan has signed and enacted the New Tax Code (came into force on 1 January 2018).
• The State Revenue Committee is a tax and
customs authority established under the Ministry
of finance of RoK.
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3. Main taxes
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Direct tax
tax paid directly to the Government by the person on whom it is imposed.
• Individual Income Tax;
• Corporate Income Tax,
• Property tax;
• Land tax;
• Social tax;
• Transport vehicle tax;
• Rent export tax;
• Special taxes for subsoil users.
Indirect tax
tax collected by intermediary (retail store) from customer and paid to the Government.
• VAT;
• Excises.
Tax rate - 10%, except for dividends which are taxed at 5%.
4. Individual Income Tax
Taxpayers
All individuals having taxable income:
1. income taxable at the source of payment:
• income of an employee;
• income of an individual from a tax agent;
• dividends, interest and winnings;
• pension payments from pension funds;
• income from insurance agreements;
• scholarships.
2. income not taxable at the source of payment:
• property income;
• taxable income of an individual entrepreneur;
• income of advocates and private notaries;
• other income.
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Deductions
• the Minimum Monthly Wage established by the State on an annual basis (KZT 28 284 as of 01.01.2018) ;
• Obligatory pension contributions (10%);
The deductions do not apply to tax non-residents.
Business Expenses
Business expenses are not deductible for employees. An individual may claim business deductions if registered as an individual entrepreneur.
5. Individual Income Tax
Employments income
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Employee’s gross income
An employee’s income (irrespective of residency status) subject to taxation, is any kind of income received from an employer in cash or in kind e.g. accommodation, benefits, compensation, company car, reimbursable business trip expenses in excess of limits.
Wage = (Basic salary – MMW – OPC)*10%
A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.
The VAT rate is 12%.
The tax period for VAT in accordance with Article 423 of the Tax Code is the calendar quarter.
Taxpayers are required to register if their VATable turnover in the preceding 12 months exceeded 30,000 MCI* (approximately USD 187,147).
*Monthly calculation index - KZT 2 405 for 2018.
6. Value-added tax
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6. Value-added tax
How VAT works?
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50 + 6 (VAT) 100 + 12 (VAT)
Payment to the budget = 12 – 6 (VAT Offset) = 6
“Input” VAT “Output” VAT
0 % VAT
export sales of goods;
international transport services;
sales of goods in SEZs under certain conditions.
Exempt from VAT
• sale of residential buildings;
• transfers of assets under finance leases;
• geological exploration and prospecting;
• sales of goods and services, associated with the implementation of infrastructure projects;
• sale of an enterprise;
• import of certain assets, the list of which is approved by the Government;
• revenue from refining precious metals (gold and platinum);
• sales of goods and services associated with medical and veterinary activities, the list of which is
approved by the Government.
6. Value-added tax
Zero-rating tax VS Exempt supplies
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0 % VAT
VAT = 0 – 6= -6 VAT REFUND!
Exempt from VAT
No refund 6. Value-added tax
Zero-rating tax VS Exempt supplies
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50 +6 100 +0 50 +6 100..
Corporate income taxes are levied by government on profit earned by business in particular time period.
Tax rate is 20%.
The tax period is a calendar year (from 1 January till 31 December).
CIT deductions - expenses associated with the earning of income are deductible.
• Business Trip Expenses.
• Interest Expense.
• Doubtful Debts. not paid within three years are recognized as doubtful.
• Depreciation. The maximum depreciation rates vary from 10% to 40%.
7. Corporate Income Tax
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Taxable income = Aggregate annual income +/- Adjustment of income – Deductions +/- Adjustments of income and deductions
7. Corporate Income Tax CIT calculation
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Adjustments of income:
In accordance with Article 241 of Tax Code dividends and certain types of income are excluded from
aggregate annual income.
Income and deductions are subject to adjustments in cases of totally or partially return of goods, changes in price and
discounts (Article 287 of the Code).
CIT = 20% (Taxable Income – decrease in TI – prior-year losses)
(If applicable)
Payers of the corporate property tax include:
1. legal entities (Kazakh or foreign) holding taxable items in Kazakhstan through
ownership, economic or operational control;
2. individual entrepreneurs (sole traders)
holding taxable items in Kazakhstan through ownership; and
3. concessionaires holding taxable items
through ownership or use right, which items form the subject of concession under the concession agreement.
Tax rate: 1.5% of the average annual value of taxable items
Individual Property Tax:
The tax is payable by individuals who own houses, buildings, country houses, garages and other facilities, constructions and premises.
The tax rate is determined based on a sliding scale and is dependent on the value of a taxable item.
8. Property tax
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Tax base: land plot
Tax payers: holding land plots (or a land share, in case of joint shared ownership over a land plot) :
-individuals, -legal entities,
-individual entrepreneurs,
based on:
-right of ownership,
-right of permanent land use -right of primary free-of-charge temporary land use.
Basic rates of the land tax are
established by the Tax Code and differ depending on the soil quality, location, water supply and other parameters of the land plot.
For agricultural and farming enterprises engaged in certain types of operations, payment of the land tax is substituted by a unified land tax payment.
Exempt taxable items:
-land of public use (streets, parks);
-land under state automobile roads of public use etc.
9. Land tax
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Tax payers:
Legal entities and Individuals with the right of ownership.
The tax rate depends on the vehicle type and engine size.
Exempt taxpayers:
• Agricultural producers;
• State institutions;
• Public associations of invalids;
• WWII participants etc.
10. Transport vehicle tax
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10. Transport vehicle tax
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Taxpayers:
1)individual entrepreneurs;
2) private notaries, private officers of justice, advocates, and professional mediators;
3) resident legal persons of the Republic of Kazakhstan
4) non-residents via permanent establishments in Kazakhstan
Tax rate: 9,5 % (payed by employers);
Social contribution: 3,5%
Tax period: on monthly basis.
11. Social tax
Social tax is an obligation which is imposed on taxpayers to obtain revenue required for pension insurance, state health insurance and other social needs.
Social Tax = (Salary – OPC)*9,5% - SC;
SC = (Salary – OPC)*3,5%
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12. Tax Audit
Tax audits main categories:
• Comprehensive tax audit
• Thematic (targeted) tax audit
• Cross-check tax audit
Tax audits are carried out by tax authorities for the purpose of securing taxpayers’ compliance with the legislation of Kazakhstan concerning taxes.
Tax audits can cover any period within the statute of limitations, which is generally five years.
Upon completion of a tax audit, the state revenue authorities usually issue a tax audit act (if no violations of tax law are discovered, an appropriate note is made in the tax audit act).
The Code of Administrative Violations imposes administrative penalties for non-compliance with tax regulations (usually 30% to 50% of the under-declared amount).
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